Sunday 31 July 2016 8:53 pm
Revealed: How West Ham owners are free to cash in on Olympic Stadium deal
West Ham United’s complex deal for the Olympic Stadium, the full details of which are laid bare for the first time today, could make the football club’s wealthy owners even richer than previously thought – at the expense of the taxpayer. As the Hammers prepare to play their first match at the largely public-funded £700m venue this week, new analysis by City A.M. has revealed the extent to which billionaire David Sullivan and co-owner David Gold, who is worth an estimated £350m, are free to cash in on the deal. Legacy chiefs, who negotiated the contract with West Ham, were sufficiently concerned that Sullivan and Gold might make a quick fortune by selling up soon after relocating to the iconic stadium that their lease contains provision to recoup a percentage of any sale price to the public purse. But closer examination of the contract, which was the subject of a legal fight over attempts to suppress it, reveals that provision to be weaker than first reported – because debts can be offset against any sale. This means that Sullivan and Gold could bank a profit of around £31m without paying back a penny. Read more: West Ham climb up list of world’s richest football clubs West Ham say 67-year-old Sullivan and 79-year-old Gold have no plans to sell, but their resolve could be tested as the club becomes more valuable than ever – thanks to their gleaming new home in a coveted location – and as foreign investors increasingly circle England’s top clubs. The east London team’s 99-year lease to be the main users of the 60,000-seater stadium for just £2.5m a year – a shade over the average top-flight player’s salary – plus a one-off payment of £15m has been described as “winning the lottery” by Arsenal manager Arsene Wenger. It could represent a personal windfall for their owners too, despite a clause requiring shareholders to repay a percentage to the public purse. That clause takes effect if the club is sold in a deal valuing it at £125m or more during the next 10 years. The threshold would likely be met, with West Ham valued at around £200m last year. That figure looks conservative now, due to the stadium move and a new era of stable profitability among Premier League sides boosting their values across the division. Crucially, however, West Ham’s contract with E20 Stadium LLP, a partnership between the London Legacy Development Corporation and Newham Council, states that the club’s debt – much of which is owed to the owners – is offset against the value of any sale. And with debt of £91m in the most recent accounts, it effectively means the sale price would need to be far higher to trigger a taxpayer return. The precise sums fluctuate depending on the club’s debt and when any hypothetical sale takes place, but are indicative of the owners’ strong position. Sullivan and Gold are also entitled to receive interest on their shareholder loans at a rate of between six and seven per cent, which is either paid in cash or added to the outstanding debt. If it took place now, even a £215m sale would fail to earn the taxpayer a penny, based on the club’s most up-to-date available financial information. Sullivan and Gold, meanwhile, would stand to pocket at least £165m – a profit of around £31m on their investment – in that scenario. A sale at a higher price would see some money trickle back to the public purse, but only a fraction of the take secured by long-time business associates Sullivan and Gold, who own 86.2 per cent of shares between them. A £250m sale would bank the pair £193m – a profit of at least £59m. By contrast, just £2.8m would return to the taxpayer. That is around one per cent of the £272m cost of converting the Olympic Stadium into a football-ready, 60,000-seat arena following London 2012. Were Sullivan and Gold to sell in a £300m deal, they would take £231m, representing a £97m profit. Less than £9m – £1.5m short of what the Hammers paid for star player Dimitri Payet last summer – would flow back to the taxpayer. From a £350m sale, Sullivan and Gold would take £265m – a profit of £131m – while the public purse would receive £19m. A spokesperson for West Ham told City A.M.: “This is a moot point because the chairmen have no intention of selling.” The London Legacy Development Corporation (LLDC) declined to comment. Sullivan reiterated in December that he and Gold were not looking to sell, although he conceded that they might be tempted if a wealthy individual made them a huge offer. “We have zero desire to sell the club unless the king of Saudi Arabia or the Sultan of Brunei come along. We’re not going to sell to an American or Chinese consortium,” he told Sky Sports. “We might sell a minority shareholding to clear our debts, but in all probability our kids will take over from us. We love West Ham; we’re not going anywhere.” Gold has argued that West Ham’s use of the stadium, which begins on Thursday when they play Slovenian side NK Domzale in a Europa League qualifying match, will prevent it from becoming a white elephant. Full details of West Ham’s contract for the stadium were only published in April after the LLDC accepted defeat in its legal fight with a football supporters’ coalition to keep some of the details secret.